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The Future Status of Traffic Associations; Japan and the

Gold Standard.
HE decision of the United States Supreme Court in

the case of the Trans-Missouri Freight Association has by this time become almost a matter of ancient history; but there are certain facts bearing on the situation, which have not been adequately discussed, that tend to make the probable results of this decision less serious than most people have expected.

The gist of this decision was that a traffic association, taking away from its several members the right of making rates independently, is a combination in restraint of trade under the meaning of the Sherman Act; and that the Court will not undertake to enquire whether such restraint be wisely or unwisely exerted: the combination is illegal in any event. The apparent result of this decision is to prohibit the various agencies which exist for the making of joint rates and to throw the whole transportation business of the country into chaos. But there are strong reasons to believe that this result will not follow.

On this point the history of the pooling clause of the Interstate Commerce Act is very instructive. This was perfectly explicit in prohibiting the railroads from dividing their traffic or their earnings from that traffic. Those who were familiar with railroad economy knew that rates could not be maintained by competing roads without some such procedure; and they thus foresaw a period of unlimited ratecutting. But what was the result? Simply that the pooling

clause ultimately proved a dead letter. It was either evaded or ignored by our traffic associations. Had there been good reasons in public policy for the prohibition of railroad pools, such evasion or neglect would not have been tolerated ; but as there was every reason against this prohibition, the law on the subject counted for nothing. We may anticipate a similar result, if the Supreme Court adopts a construction of the anti-trust law which interferes with good business methods. If it has to choose between the two, the public cares more for good business methods than it does for the authority of the Supreme Court.

It may be objected that the failure of the pooling clause was simply the failure of a statute, which is notoriously more frequent than the failure of a judicial decision by a court of final authority; and that the two cases are therefore not parallel. But it may be urged on the other hand that the necessity of pooling is far less obvious than the necessity of traffic agreements for quoting joint rates; and that a judicial decision which attacks the latter power is as weak, relatively, as a statute which attacks the former. The power of either legislature or courts to prevent agreements which operate in the public interest is far less than is commonly supposed. The law may be so framed that the courts will refuse to support any given agreement, and may thus make its continuance depend on the good faith of the contracting parties. So far as the maintenance of any agreement or contract is really dependent on the authority of the courts, the withdrawal of the right to appeal to that authority will destroy the force of the agreement. But where the maintenance of the agreement rests on the character and intentions of the parties themselves, the withdrawal of the right does not destroy it; and in these circumstances the threat of statutory penalties usually has little effect.

The agreements upon which our present traffic associations are founded belong distinctly to the latter class. They have little to fear from the withdrawal of legal protection, because they rely on something quite different for their existence and maintenance. This is the reason why the adverse judicial decision has had no effect upon rates. The legal power of the

association to maintain rates was about as good after the decision as before it, because it had amounted to nothing at either time. Where the courts had given no support they could take none away. The only real difference was that, before the decision, a traffic association was one kind of a misdemeanor under one statute, and now it is two kinds of a misdemeanor under two statutes. If it continued to live unmolested in the former state, we doubt whether the latter will prove much worse.

Japan has surprised the world almost as much by her sudden adoption of the gold standard as she did by her overwhelming defeat of China in the late war. In fact, however, the adoption of the gold standard is not new, but is merely a return to a policy adopted over a quarter of a century ago. At the time of the expedition of Commodore Perry her whole currency was in a most disordered and chaotic condition. A new mint was, however, established in 1868, and opened in 1871, and in the same year the gold standard was adopted. But in 1878 the use of the trade yen of 416 grains of silver was extended to all payments, and this had the effect, under the well-known operation of Gresham's law, of driving all of the gold out of circulation and making Japan virtually a silver country. The redemption of the notes of the Imperial Bank of Japan in silver tended still further to confirm the impression that Japan was a silver country, but she had become so, as has been shown, not from design, but from force of circumstances, and it was not unnatural, there. fore, that she should take advantage of her success in the war with China and of the large war indemnity paid in gold to carry out effectively what had been attempted in 1871.

The way had been prepared by the appointment of a currency commission in 1893, but the report of this commission was not decidedly in favor of the gold standard. The special effects on Japan of the fall in the price of silver were stated by the commission to consist in an increase of exports, a rise of prices, and consequent suffering of wage earners; profits for debtors and taxpayers; prosperity for commerce,

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